I received an interesting question about Maryland tax sales from a subscriber who downloaded information from one of the Maryland county web sites.
In the information that they downloaded it had the date and time for their next tax sale but it specifically said “we do not sell liens.” This was quite confusing since Maryland is a lien state and there was no mention of deeds or redeemable deeds. In fact everything that was said regarding the procedures for the tax sale led me to believe that they were indeed selling liens and not deeds, so I had to call the the Tax Office and speak to the tax collector for a while to find out what the story is.
They do essentially sell tax liens, but they do not refer to them as such, and a lien is not recorded with the county. In fact what the tax collector said is that what they are selling is the right to foreclose on the property if the property is not redeemed in 6 months from the tax sale. There is no lien recorded with the county because when any property is bought or sold in the state of Maryland, the tax bill has to be satisfied first. So the property cannot be sold without paying off the tax lien – even though it’s not called a tax lien, that is essentially what it is. The reason they claim they do not sell liens is because they do not sell left-over liens.
There are some differences in Maryland when it comes to tax sales, and foreclosing on tax liens. You get a receipt the day of the sale and you don’t get the certificate until it’s time to foreclose. You have to go through a regular foreclosure procedure (with an attorney) but you can get the property free and clear if you through the foreclosure procedures. The redemption period is quite short, only 6 months, and you have 2 years from the day of the tax sale to take action, or your tax certificate will expire worthless.
What is High Bid Premium?
Premium is paid for tax liens in Maryland, however, you don’t have to pay the entire premium at the tax sale. In fact you may not have to any of the premium at all. At the tax sale, the high bidder will pay the amount due for the certificate plus any “high bid premium” which varies with each county. “High bid premium” refers to a percentage of the premium amount that is bid which is over 40% of the “threshold,” or the assessed value of the property (or the lien amount – whichever is higher). Each county may set the percentage of this amount that needs to be paid at the sale along with the lien amount.
In Baltimore City the High Bid Premium is 20% of the difference between the bid and the threshold. For example: if you bid $25,000 on a property with a lien amount of $5,000 and the assessed value of this property is $100,000:
The “threshold” amount – 40% of the assessed value is $40,000 which is greater than the bid amount so you wouldn’t have to pay the high bid premium at the tax sale.
If the property was assessed at $50,000, then:
- the threshold is $20,000 (40% of assessed value)
- the difference between what you bid and the threshold is $5,000 ($25,000-$20,000 = $5,000)
- you would have to pay 20% of $5000, in this case $1000 in addition to the lien amount of $5000, for a total of $6,000 in order to get the lien.
Regardless of how much you pay at the tax sale. All of the premium would have to paid if the lien does not redeem and you get to foreclose on the property.
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